SoftBank Buys Vision Fund’s Stake in Arm at $64 Billion Valuation
Japanese technology investor arranges deal ahead of the chip designer’s planned IPO, expected to be the largest of the year
SoftBank 9984 0.22%increase; green up pointing triangle Group recently bought a 25% stake in Arm Ltd. that was held by the Japanese technology investor’s Vision Fund unit, in a deal that values the chip designer at slightly more than $64 billion, according to people familiar with the matter.
The deal signals the valuation SoftBank could aim to achieve from Arm’s much anticipated initial public offering in New York next month.
The offering is expected to be the largest IPO this year.
Moving the stake from the Vision Fund to the parent company will amp up pressure on SoftBank to achieve or better that valuation level in the IPO.
SoftBank acquired Arm, whose chip designs are used in the vast majority of smartphones and mobile devices, for about $32 billion in 2016.
It subsequently sold 25% of the business for $8 billion to the Vision Fund, which was set up to invest in new technologies.
Through the deal, SoftBank effectively is buying out the Vision Fund’s Middle Eastern backers—Saudi Arabia’s Public Investment Fund and Mubadala Investment, an investment division of Abu Dhabi, which put up most of the money in the Vision Fund.
SoftBank itself put nearly $28 billion into the $100 billion fund.
SoftBank at a corporate level already owns the other 75% of the chip designer.
The deal more than doubles the value of the Vision Fund’s stake in Arm to more than $16 billion—a rare win for the fund, which has failed to live up to lofty expectations.
In the planned IPO, SoftBank intends to sell a minority stake of the U.K.-based business and list the shares on the Nasdaq. The offering gives SoftBank a way to sell down its holding in Arm over time to reap future gains if the stock appreciates. This plan comes after its $40 billion plan to sell the company to Nvidia, an artificial intelligence and graphics-chip maker, failed because of regulatory opposition.
The Japanese tech conglomerate, led by its billionaire founder Masayoshi Son, has spent much of the past two years selling off years-old investments to raise cash and pay down debt.
The Arm IPO would give SoftBank fresh capital to restart its wide-ranging investments in the tech startup space.
The company recently said it wants to renew its push for large-scale investments in artificial intelligence.
SoftBank is expected to lift the veil on Arm’s planned IPO as soon as Monday by making its so-called F-1 document public, some of the people said.
That filing will lay out details about Arm’s financials and operations. It likely won’t include any targets on valuation, IPO pricing or the amount to be raised from the issue.
According to some of the people familiar with the matter, SoftBank aims to sell roughly 10% of the company in the offering.
The company and its bankers will lay out a target valuation range in an amended filing, published right before the company kicks off its planned IPO roadshow in September, according to people familiar with the matter. The roadshow is several days long when the company meets with potential investors to pitch shares in its offering.
Reuters earlier reported that SoftBank was in talks to acquire Vision Fund’s stake in Arm.
The offering, because of its large size, will be closely watched by investors as further proof of whether the recent revival in the IPO market is sustainable. It will follow the successful, but smaller issues, in June by restaurant chain Cava Group and in July by Oddity Tech, a direct-to-consumer seller of makeup brands.
Arm has held talks with some of Arm partners and customers for the sale of small stakes in the IPO each worth up to $100 million, according to people familiar with the matter. It couldn’t be learned which, if any of these investors, plan to participate.
Companies sometimes invite strategic and big-name financial investors to invest in their IPO because of existing relationships or to help gain credibility with the broader market to boost demand for the issue.